Solution 12/7/2012
Chapter: 2
Problem: 15
Lan & Chen Technologies: Income Statements for Year Ending December 31
(Thousands of Dollars)
2013 2012
Sales $945,000 $900,000
Expenses excluding depreciation and amortization 812,700 774,000
EBITDA $132,300 $126,000
Lan & Chen Technologies: December 31 Balance Sheets
(Thousands of Dollars)
Assets 2013 2012
Cash and cash equivalents $47,250 $45,000
Short-term investments 3,800 3,600
Accounts Receivable 283,500 270,000
Total current assets $476,300 $453,600
Net fixed assets 330,750 315,000
Liabilities and equity
Accounts payable $94,500 $90,000
Accruals 47,250 45,000
Notes payable 26,262 9,000
Total current liabilities $168,012 $144,000
Long-term debt 94,500 90,000
Total liabilities $262,512 $234,000
Common stock 444,600 444,600
Retained Earnings 99,938 90,000
Total common equity $544,538 $534,600
Key Input Data
Tax rate
40%
Net operating working capital
a. Using the financial statements shown below, calculate net operating working capital, total net
operating capital, net operating profit after taxes, free cash flow, and return on invested capital for
the most recent year.
2012 NOWC =
Operating
current assets
–
Operating
current
liabilities
$450,000 –$135,000
$315,000
Total net operating capital
2013 TOC = NOWC + Fixed assets
2013 TOC =
$330,750 +$330,750
2013 TOC =
$661,500
$315,000 +$315,000
$630,000
Investment in total net operating capital
2013 2012
2013 Inv. In TOC = TOC – TOC
2013 Inv. In TOC =
$661,500 –$630,000
2013 Inv. In TOC =
$31,500
Net operating profit after taxes
$59,520
Free cash flow
$28,020
Return on invested capital
9.0%
2013 NOPAT = EBIT x ( 1 – T )
Additional Input Data
Stock price per share
$65.00
15,000
Market Value Added
b. Assume that there were 15 million shares outstanding at the end of the year, the year-end closing
stock price was $65 per share, and the after-tax cost of capital was 8%. Calculate EVA and MVA for
the most recent year.
Operating
current assets
current
liabilities
$472,500 –$141,750
$330,750
